The digitizer on top of the lcd display is most likely faulty, try a hard reset, if it doesn't solve the problem the digitizer would need to be replaced.

To perform a hard reset
1. Press and hold the Comm Manager button and Voice Command
button on the device.
2. Keep the two buttons pressed, and at the same time, use the
stylus to lightly press and hold the RESET button.

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I cases like this you might not have a choice but to factory reset to fix the start-up error. Repeat a hard reset (Vol up/Power button) and make an effort to get to the tablet Settings after boot up. Get to the Settings>Backup & reset>Factory data reset. In the majority of cases a factory reset will resolve critical issues. This is thought of as a "nuclear option."

If this nuclear option fails then a more complicated process that's beyond this post is to consider installing a custom Android ROM after rooting the device. XDA has a forum discussing rooting and installing custom ROMs for Stealth tablets: http://forum.xda-developers.com/showpost.php?p=34126848

Dont kno if "Impression" is similar to "Omnia" but 'REMOTE SCREEN ALIGNMENT' program installed on PC skips 'align screen' on your phone. Also "welcome.not" (made in notepad) & pasted into your root files. A REGISTRY EDITOR will allow you to input the touchscreen configuration numbers manually. Of course, none of these will be much good if you dont have 'Windows" phone or cant access your Registry!!

At the expense of your data-loss,
atleast you get your device working back.

To perform a hard-reset on your O2 Xda Atom,
Keep pressed the POWER key, and then perform soft reset. After the device this leave everything and confirm that you want to hard-reset as shown on the screen.

I there,
My XDA II has developed exactly the same problem and I think I have descovered what the problem is...
My XDA as a very small gap between the screen and the plastic case, I noticed that a piece of grit gad got in there and I used the corner of a piece of paper to try to remove the particle. I was unsuccessful and only managed to move the piece of grit up to the top right hab corner of the screen. Imediatly after this I started having trouble. I have now found if I push the plastic case into closer proximity to the screen I starts to work again.
Please try this and see how you get on. It may be that I have to have my screen replaced!! Or at the very least the dust etc cleaned out from around the screen.